>> live from pier 3 in san francisco, welcome to "bloomberg west," where we cover innovation, technology, and the future of business. i'm cory johnson in for emily chang. first a check of your bloomberg top stories. president obama facing the press a day after democrats lost control of the senext senate. >> the american people sent a message. one they have sent for several elections. they expect the people they elect to work as hard as they do. they expect us to focus on their ambitions and not ours.

they want us to get the job done. all of us, in both parties. leaderte republican mitch mcconnell says he would also like to end the gridlock in washington. soaring, $1cbs billion for the proceeds of the spinoff of a billboard company the outdoor tv and ad revenue up slightly. strong ratings from thursday from nfl games. againina hitting qualcomm in the monthly earnings report. till having trouble connecting license fees from reluctant chinese companies. lowering the forecast as a result and revenue in the fourth quarter rose just 3% year-over-year. net income up 26%. and a popular question in silicon valley, are we in a tax bubble?

>> i don't think it is a bubblelike in the late 90's. i think the bubble is the type of social phenomenon and only happens when the public that's involved. the in the 90's, housing in 2000. this time around, the public has not been involved. you have 300 ipos a year in the u.s. and today you may have 30 or 40 a year. >> he says the companies he's invested in do not feel overvalued. lead, a lecture carmaker tesla will not reach goals delivering 45,000 cars this year. 33,000. its forecast of it is only about 3% more than last quarter, the most they have ever delivered. the company also sees its new model ask coming later than it anticipated next year. it is now slated for the fall of next year.

revenues up 55% in the quarter. little bit in after-hours trading and a little bit more in a conference call. analyst and bloomberg news reporter from detroit. jamie, let me start with you. i'm going to call the news mixed. some of the numbers weren't as bad as somewhat have expected but the delay of the next product and the cutting of the sales forecast seems like worse news than the market reaction might suggest. >> you're absolutely right. definitely a mixed report. the beat estimates for earnings per share, they adjusted earnings per share. but only by a couple of cents and i thought the market would've responded more negatively to the operating setbacks, but maybe it was the projection of really another year of 50% growth next year. it'd say they expect 50,000 sales next year.

basel obviously mostly be model s's. back, i have to push a little bit. they are not making money, they are losing money. but they make money on the sales of those cars. it seems like there has been some concern raised about the demand for the vehicles and maybe they had already saturated demand in the u.s. or elsewhere. and maybe it doesn't seem to be as much of a concern. at least they're projecting another year of robust sales growth. >> your reaction? >> to the point of robust sales growth, they cut their guidance from 13,200 to 11,200. the growth next your they are guiding 12,500 per quarter so basically seals -- sales have peaked. sales, ify model s

they hit an unprecedented pace next quarter, they will have to stay at that number and be flat the whole year? >> the 50,000 guidance isn't much above the q4 -- >> 50,000 divided by four? i'm not good at math but i did it in my head there. were going to miss the number, you were wrong. why? >> they do have their only seen business which there is about 350 cars i could've been accounted for differently. suspectr thing that a is they had a rush of deliveries toward the end of the quarter that they talked about a little bit when they were discussing their reservation backlog. i think to get out ahead of the october 9 announcement for the upgrades, the autopilot, they tried to get every existing vehicle without those features out of the customers hands. >> they did not want to be sitting on stuff with the latest

greatest thing on october 10 and announcing a new product october 9. the gut every delivery done they could in the quarter. >> it is probably greater this quarter. sales at theve had end of september that were actually registered in october. with model registrations. >> does it count if the car is not registered? >> yes, sometimes there is a delay when the registry reports the registration. were on the call and i haven't listened to it yet, what is the general tone? forth andack and still editing the story in the call is still going on so i only hurt a little but definitely some questions asking about the model x delays. but the stock kept going up through the call so they must be saying something that people like to hear. >> why is the stock going up?

i am a business analyst, not a stock analyst, but it's part of the story. so with particular things on the call, it is really short covering after the close? >> a think it is sure covering and technical related. exactly. >> one of the things that jumped out at me was an issue that i can't really unpack which is warranty. they are on the hook to make sure the car works for a certain time after the car is out but that is an assessment. they can possibly note the war and tea costs will be because the cars haven't been around for a while. they changed the guess this quarter and took a $14 million charge. >> they don't really know based on their experience. i think they have used warranty

provisions to move around earnings a little bit. the warrantyate cost expense per mile driven over the 50,000 mile warranty, it should've been a $4500 cost and a provisions 2500. >> you think this 14 million won't be enough and there could be more adjustments? really see it until year two or three of the cars life. >> is it optimism of quality or doesn't help numbers? >> i think it's a little of both. >> what is your biggest take away from the news today from tesla? >> i do want to address the warranty thing. 4500 sounds like a lot per car .o me it is a challenge to predict those for everybody. we have seen it a lot this year with ford, gm, and a lot of the established automakers having to change either the way they account for warranty or what

they think it's going to cost because recalls are so much more common now. you have widespread use of common parts and you could end up having to recall millions of vehicles over one defective design or one suppliers mistake. it's a tricky business for everybody. what was your other question? >> biggest take away, real quick. take away was the optimism. we have seen a lot of quarters where they beat the number and the stock falls. it's interesting to see the negative operating numbers and still the stock towing up this afternoon. >> i think there is no better example of a company that can be complete we separate from stock. as for you, the model x delay means what? >> it is hard to fill the gap between today and the introduction of the model x. people talk about it being a

much newer and greater and latest iteration. >> we really appreciate your time, nathan weiss and jamie burke. we will be back with more "bloomberg west. " ♪

>> i'm cory johnson, this is bloomberg west. electronic voting machines used in dozens of states, zero paper trail can be traced in case of any text glitches. one voter experienced this trying to cast a vote. rushing a button and not getting the right response. i spoke with barbara simmons -- barbara steinman. promotesit that election accuracy, transparency, and verifiability. i started by asking her what went wrong in virginia. >> one of the problems with paperless machines such as that voter was experiencing is there is no way to check if the vote was accurately recorded.

you can see, he push one button and it showed another candidate, but it's possible that even though the screen showed another candidate, his selection was collect the -- correctly recorded. what happens may be different than what the screen shows. or it may not have been. >> how will we ever know if it ever happened? -- iinteresting to me is was thinking about this yesterday, handing my mail-in ballot at the polling place. makescrecy of the thing it very different than commercial applications where if i use my american express card, i can check the account later, might get a receipt e-mailed to me. bring us up on the history of it? >> the secrecy of the ballot makes voting a much harder problem than simile doing commerce. why we recommend against internet voting at this time because there's no way to verify

given the commercially available system that your selection that you made on your computer is what gets sent over the internet and what gets received by the election officials, nothing of the fact that your machine may have been hacked. >> we did a piece earlier this week about the government of estonia, just on the cutting-edge of all of these things. >> so they say. >> i was talking to someone who runs a venture capital group and he had a meeting with the president of estonia and asked questions about the cloud and then they had this rate deep understanding, even at the level that intel was amazed at the level of the questions. you say so they say, is there internet voting where it is working? could it be a model for what we have in the u.s.? >> estonia claims they have that model but we know that there -- that they are vulnerable. study done on the estonian

system by top security experts basically showed that the machines can be hacked. >> has it been? >> we don't know. that is the whole problem. we knew use a system that you can't verify if the results are accurate or not, it's really serious. in california, we have paper ballots. if there's an issue we can do a total hand recount. >> but we have seen issues with that as well with the election in 2000 and the debacle of hanging chads and what is a vote and what is filled in and what is not. is it any less inaccurate than the level their? there will always be errors, right? >> you want to minimize that. it was the technology, not the paper. i am sure that folks can relate that there is good technology and bad technology. in parts of florida, there were precincts where they didn't

empty properly and people would punch and it would not go through so you get these different kinds of chads. in colorado, it was well maintained and there was no problem. i don't advocate that system, but it wasn't paper that was the problem. states that have zero paper trail, is there a notion that that is not what state-of-the-art should be? or are we proceeding ahead as that is the future? >> the trend has been away from paperless voting. states, they have passed laws to change their system. maryland is moving forward and new jersey is still waiting. there is a mistaken belief that it is expensive to move to another system but if you move to some of these paper ballot systems, it's still cheaper than the cost of maintaining these old machines that are falling apart and have to be securely stored. a lot of what was on the midterm is these machines are failing. that wasn'te things

talked about in the breathless coverage of the horse race last night is the selection was very different and really important changes in the ability or people to vote. it assumes united allow for corporate contributions we have not seen before, laws passed in a number of states to make it harder for people to vote requiring more id, affecting certain people, poor people and minorities and women more than others. all those things take place in the selection. is there any notion that the decisions being made about what kind of technology is being used to repress the vote? >> there is always the concern. the ultimate form of disenfranchisement is to vote and have it not recorded correctly. that is the ultimate disenfranchisement. we don't know if that's being done or not. sometimes it happens because there is a software bug. states have no paper whatsoever and other states where there are sections that don't have paper.

it doesn't have to be malicious and they can change the outcome. fortunately, there was paper and we could double check. ♪

>> welcome back to bloomberg west, i'm cory johnson. only the conference -- holding the conference, the theme is disruption. we talked to the coo and the change taking place among the large established tech companies in silicon valley. >> technology is never without change. thes the one constant in industry. it is always changing and reinventing itself and i think that is part of the cycle we are seeing is that continuous reinvention and in some ways, it fits even with the broader theme of our conference and the fact that there is a constant

disruption from technology both in terms of how it affects the users and the companies themselves. >> emily chang spoke at the malcolmce with gladwell. she asked about what tech companies can learn from his big book. >> your argument is disadvantages can become advantages and create opportunities. you speak with cancer researchers, civil rights leaders. what can a tech ceo take from this book? think what is interesting is that -- this is not a new thought, but one that bears repeating -- diversity is the best feature. overcoming disadvantages can be . more efficient way >> where do you see the david and goliath and technology act

rightwhat is fascinating now is how quickly companies transition from being underdogs to being goliath. we are used to the trajectory where microsoft starts and it takes them, whatever, 15 years to go from the upstart to the monolith. today, i think it's a matter of years, a couple of years where facebook had gone from nowhere to being a dominant player. they had a procedure disadvantage and suddenly being saddled with all of the attributes of my goliath. boom. >> do some unlike steve jobs or , two of the largest ceos and tech entrepreneurs of our time, they were both adopted, do they fall into this

category of david who beat the odds? >> i talk a little bit about family origins. i was very fascinated by this with the very large numbers of successful people. a hugely disproportionate number of them were orphaned as .hildren way higher than the general population. it goes to answer the question skillse do people learn of adaptation and resilience? ae answer is that you develop certain set of strengths, a certain kind of armor that protects you when you go out in the world. in this universe of successful people, we see patterns of trauma that happen again and again. when you talk about being

adopted as a form of that, it is an unusual but difficult experience. those that managed to cope with it successfully emerge stronger. >> our very own emily chang speaking with occam gladwell. you can catch the full sitdown next week on studio 1.0. "bloomberg west" right after the break. ♪ >> it's time for bloomberg television on the market. i'm julie hyman. let's take a look at where stocks traded today. we did have a rally on the heels of victories of republicans and the perception that that will be good for business going forward. energy and utilities opened the lead to gains in the session and the dow and s&p rising to record closes.

♪

>> i'm cory johnson and this is "bloomberg west."

streaming on your phone, tablet, and bloomberg.com. retailing employed with social media phenomenon after a candid photo -- so cute. a target cash register went viral and some say it was actually a hoax. the ceo marketing firm called breaker is taking credit for alex from target. post last night, both target and alex have denied knowing anything about raker. not, the justin bieber of the cash register, what does it mean for target? michael from new york, producing viral video content. >> it is interesting how it is still unraveling.

they have reached out to the ceo of breaker and asked him very specific things and it seems to be no real data to back -- there is somebody trying to take credit, so i am just fascinated and i will keep following it. >> taking credit where credit is not do here is an amazing thing. talk to me about the story. these shoebox claiming plurality is nothing new. gives companies like us a bad name because they can't really deliver on this stuff. doing this andop at the same time, brands and agencies need to stop trying to go viral.

it is not a strategy. it is a strategy based on winning the lottery. somebody's going to win and it's not going to be us. take it a guy who has one more times than anybody. right now, they need to make sure that when they get it in their minds to go viral, call me and i will set up a hotline. if you think viral and i will walk you off the ledge and with some sense into you. >> you promise a rant, thanks for delivering. cute.d is the thing did have a viral notion to it here. the you're saying is that hoax was a hoax. exists, but it is hard to control. the way to win is to create good content and get good distribution like the good old days and get good customer engagement. if you don't have any of those

you will not build a business around it. needs girls that radically and magically spot a target boy and have nothing to do with morality the way businesses see it. >> i think you're jealous a little bit, then. what is the value of something like this for target? particularly the audience target is targeting here. >> we look at what is happening buzz around anything target related. it's working for them. the blur talking about it because they remain connected to target. from what i have read, they denied being behind it or having had any sort of business plan to have kicked it off themselves. alex himself has denied it and said he never heard of the company until they recently came out and tried to take credit for it. 'meme,'then were a

knows better than anybody how difficult and challenging it can be to start one. to be transparent, especially at the agency and really be honest and transparent. this seems to be a lot of gray area here where they just can't show that data. i am interested to see where this is going. of creating this positive buzz or publicity for the brand itself, people are talking about it, but it is somehow backfiring because it seems very shady to me that this is happening. >> let me ask you. when a corporate customer comes to you and says, i want to be relevant on social media to drive sales of my business. is this an example of something? what does this mean for a company in terms of dollars and cents? what would it cost to start something like this?

lightning in a bottle and target needs to realize they have something in sees the opportunity. if they can't do that right now, alex will probably have a life span that will be less than a one-hit wonder song. figure out how to turn him into a persona, a talent. right now he has no talent we can see other than looking like himself. isn't long enough, it isn't good enough. >> bagging groceries is tough work. we can have a discussion about how much talent you need him a started but make charity ambassador for the holiday. this is perfect timing and worth tens of millions of dollars if target plays their cards right. >> is that right? >> that sounds about right. scale, buthe smaller he is absolutely right. with the right strategy, you can

turn this into something very effective and very positive for target and for the guy involved who was a nobody and now has 500,000 twitter followers. there is a momentum that if you know what you're doing, you can do the right move and create something really great. i am interested to see where this is going. i will give you that target might pay tens of millions of dollars to get something. i cannot believe that the company would give tens of millions of dollars of more profit because of this kid. if they play their cards right. here is what happens. target is clearly the brand of choice for this middle to upper middle-class suburban demographic that this kid alex is appealing to. at least the teenage children of that market. figure out a way to leverage him so that he becomes a celebrity

that does something good for the holiday season. thate out how to leverage so these teenage girls will appear at target with their parents and friends. that is worth millions of dollars during the holiday season. >> interesting to see if they can pull it off. thank you for helping us figure out connecting the dollars to the cuteness of alex from target. cute, the ceo and cofounder. bloomberg west will be right back. ♪

>> welcome back to "bloomberg west." i'm cory johnson. additional minted funding. the online marketplace that sells greeting cards and prints also expanded to textiles and on the core as the company gears up for the holiday season.

emily chang sat down with the founder and ceo to talk about the company's future plans. and it is a design marketplace that crowd sources everything from an independent community and we have the freshest designs and art always coming in and the crowd votes to tell us what to sell. it's crowd sourced and crowd curated. once we saw the success we were having an art and stationary, we realize we could replicate this. textiles we just launched. dutiful designs from all over the world i came to our first competition. that is a stepping stone for us and to home decor. so we can take textiles and sell them directly to consumers. >> i am obsessed with textiles. i'm really into this. you're actually giving designers the storefront. how does that work echo >> that's another big change to the model. before you had to win a

competition and we will give winning designers who are vetted stores on our platform and we can use our entire fulfillment, manufacturing backend to power their businesses. >> how is this different from at sea -- etsy? >> we make everything for the designer. you upload the art and we make everything for you so you don't have to spend the whole day shipping and doing customer service. creative people don't actually have the time for that so this is a different audience, people who may not have time to run their businesses full-time. >> how have instagram and pinterest affected your business? has been terrific because it has been this massive design education for the public. people no longer are accepting lesser design. they are raising the bar for what they expect from weddings, homes, apparel. people are sharing imagery across the whole globe and i think it makes design more important and consumers are

taking more based on design. >> do you see spikes of traffic from pinterest? >> we get a fair amount of traffic because the products are well designed and very unique coming from every corner of the globe and being vetted. designs travel well on pinterest and instagram. on theterfly has been block end up for sale. what does that mean for minted? >> we don't pay much attention to it. they're very much a design marketplace and not really a stationary retailer as a broader design marketplace with many vertical and crowd sourcing which is a very different proposition. we don't pay much attention to it. frankly, just day today, it's business as usual. >> what do you want out of the future at minted? you work to goldman back in the day, what is the future? is this a company you want to remain independent, go public,

some thing you want to sell one day act out >> i think we are building an independent company and it is a big proposition to say we will be the best design marketplace in the world that offers a chance for consumers and designers to connect. it means our opportunities are endless to use crowd sourcing to disrupt vertical after vertical. home decor is one of the many places we can go with this. >> where else? >> i think we are agnostic between digital and physical. we are a content company that can monetize either digital or physical form. home deck or is a very large space. there are many sub verticals that we will probably enter. it is a big and long future for us. >> you're going into the busiest time of year. what are you guys doing to prepare? anything different from the way you did last year to be faster and better?

>> it's a big season for us. holiday cards are a big business for us. we have better and better people and more experienced people , developing teams people from within. i think it's about having the expertise to scale up for the holidays. founderinted ceo and with emily chang. more bloomberg west right after this. ♪

x this is "bloomberg west." i'm cory johnson. the ritter surveillance agency calls facebook the command and control network of choice for terrorists and criminals. op-ed,financial times robert hannigan urged the company to do more about law enforcement investigation. criticizedr recently tech companies for increasing decryption on mobile data. center ofs first international studies. terrorists on twitter and facebook? global networks are free to use so terrorist groups take advantage of them. global capability

that they did not have 20 years ago. we need to recognize that yes, these are tools that terrorists will use. what in particular that the law enforcement agencies or those fighting terrorism either in the u.k. or here are most upset about? >> the thing driving them now as you have a lot of europeans and a few americans who have gone to isis, gonda syria. the fear is that when these folks come back, they will be radicalized and hardened and ready to do acts of violence. it's likely they will use some of these social network services , some of these internet services as a way to communicate with each other planning their attacks. sometimes i look at this and from a civil libertarian standpoint, the concern is really that this is the methodology for where people are

pursuing their interests or some of their worst interests. that it might've gone to a library 30 years ago to learn how to follow the jihad and now they are doing it online and through social media. a little moreem advantage but you're basically right. what is the alternative? are we going to censor the internet? i don't think anybody wants to do that. there is a problem that's uncomfortable and that is why you see him i-5 and the fbi complaining about it. it's a hard problem and not clear what we can really do. >> you mentioned him i-5 and the fbi. from some ofa these companies, one of the reasons that you have google and apple trying to thwart them and their ability to get information . >> these companies have a global market. they needed to reassure their global market that they were doing everything they could to

make sure that people were safe and private. flipside, the nsa intrusions have been a little exaggerated. i remember a long time ago that i was in your meeting with the director of central intelligence and somebody said, what do we do about these companies. they will use encryption to make it harder to see what they are up to. aboutswer is, don't worry it, it's my problem, i will take care of it. at the end of the day, the nsa will have to spend more money and work harder but they will still be able to do what they need to do. companiesers of these will be safer from all kinds of hacking, maybe including the nsa. >> the notion of what is private to whom, google arguing their customers need privacy from the government isn't the same as arguing that customers need privacy from google itself. >> there is a little bit of irony and some people now say,

i'm not going to use an american company. i will use a russian e-mail server. you've got to be kidding. it's just the environment we live in. the rules are weak, technology is easy to hack. come to these are doing a good thing by making it harder. we should not delude ourselves about how much privacy we have any more. standpoint,rporate i look at the opposing views, apple's approach to google's approach. apple says you are anonymized from the second you make a transaction and google says will collect all the data, we will just decide what we want to do with it but they want to collect it and have it. it's a very different approach to business that leads to these issues of who has information and how it can be tapped. >> competing business models. let the best one win. both of them are doing well as far as i can tell. we will see how it plays out.

law enforcement and security and intelligence is, as you say, different. these people will have to work harder and adjust to the fact that companies are doing business in a different way and it makes their users a little safer. a little harder to hack. lewis, director and senior fellow for the center for strategic and international studies. the bwest byte, we focus on one number that tells a whole lot. a special by for a special person. brad stone. what do you got? the number today is 30. the number of foreign brands who, for the first time are jumping on alibaba singles day bandwagon. it's the celebration of being single. the number one being alone. tesla and others will start selling on ali baba's mall. >> i saw this last night and i could not believe it. tesla will be selling on the

t-mall? ancustomers can put down $8,000 deposit for a $70,000 car. there will be some preconfigured models. people like to customize their setup and they will not be doing that here. it gives tesla reach into the broad chinese marketplace as opposed to trying to set up dealerships. growing -- over each other] >> i had not heard of it until a year ago when ali baba was pushing this. turn a cherished holiday into an opportunity for abundant consumption and ali baba has done that in china. we are seeing western brands use it to get into the market. brad stone, thank you so much. we appreciate it. happy singles day early. get all the headlines on your

tablet, your phone, and bloomberg radio. we will see you tomorrow with lots more on "bloomberg west." ♪ .